"I demand the Israeli government punish the killers if it wants peace between the Palestinian and the Israeli peoples," Palestinian president Mahmoud Abbas said.

Netanyahu also condemned the "despicable murder" and ordered investigators to work "as quickly as possible" to track down the perpetrators, while urging both sides "not to take the law into their own hands".

There is no difference between Arab blood and Jewish blood. Murder is murder

FAMILY OF NAFTALI FRENKEL, 16

Witnesses said Mohammed Abu Khder, 16, was seen being forced into a car by three Israelis in East Jerusalem.

Police confirmed a body had been found in a forest in Givat Shaul in western Jerusalem.

Tests proved the body was that of the missing teen, his father said. "The body belongs to my son," Hussein Abu Khder said, adding that the cause of death was not clear.

The attack is widely believed to have been carried out in revenge for the kidnap and killing of three Israeli teenagers by Palestinian militants, with Israeli police raising the alert to the second highest level across the country.

Soon after dawn, crowds of angry Palestinians began gathering outside the teenager's home in Shuafat, with violent clashes erupting and showing no sign of easing hours later.

Clouds of black smoke rose into the sky as hundreds of masked Palestinians hurled stones at Israeli police in riot gear, who responded by firing rubber bullets, tear gas and sound bombs.

The Red Crescent said at least 65 people were hurt in the clashes, three by live bullets. At least 35 people were injured by rubber bullets, including six journalists. Clashes were also reported in the neighbourhood of Ras al-Amud near the Mount of Olives.

Jerusalem mayor Nir Barkat denounced the murder as a "horrible and barbaric act" and called for all sides "to exercise restraint".

Tensions have soared across the region since June 12 when the three Israeli teenagers disappeared while hitchhiking in the West Bank. Their bodies were found on Monday, with Israel blaming Hamas and vowing to hit it hard.

Calls for revenge followed, with more than 200 Israelis rampaging through Jerusalem on Tuesday night, dragging people out of cars and chanting "Death to Arabs".

As the clashes raged in Shuafat, the only place of relative calm was the family home.

Wearing a blue headscarf, 40-year-old Suha Abu Khder, mother of the missing teen, sat in stunned silence, sometimes breaking down in tears in a room filled with relatives and friends.

Ansam Abu Khder, one of the teenager's cousins, said witnesses had written down the car's licence plate number and police were examining CCTV footage.

"We knew about Mohammed's kidnapping by three Israelis before the dawn prayers. A witness saw them," he said.

The family of Naftali Frenkel, 16, one of the three murdered Israeli teenagers, condemned the incident as a "horrendous act". "There is no difference between Arab blood and Jewish blood." A family statement said. "Murder is murder. There is no forgiveness or justification for any murder."

But Hamas, accused by Israel of the triple killing, vowed Israel's government would pay for the Palestinian teen's death.

This article appeared in the South China Morning Post print edition as: